A wave of optimism (in currency and equity markets) over the potential boost to global trade with an imminent Chinese Yuan revaluation but sentiment was gradually undermined by worries over the sustainability of US growth and a brewing disagreement among G20 countries on the immediate course of fiscal intervention. The sacking of Kevin Rudd provided only the slightest relief and momentum was soon over-run by wider international concerns.
The Aussie Dollar traded lower with the sharp drops on US and European equity markets, as investors worried about the removal of the ECB’s €440bn loan facility to European banks and US consumer confidence that fell sharply last month. Investors fled risky assets en masse and sought the perceived “safe haven” of US treasuries, the Swiss Franc and Japanese Yen. Aussie data did take a back seat to events on the global stage, with weak Building Approvals (-6.6%) and Retail Sales (0.2%) only adding to reason to sell the AUD. However, the announcement of a deal reached between the Australian Government and the major mining companies over the Resource Super Profits Tax helped the Aussie to find a bottom and managed a rally.
The RBA’s rate decision on the 5th (expect no change) and accompanying statement along with the Unemployment report will give further insight into the strength of the Australian economy. The AUD direction will once again be dictated by fluctuating risk appetite.
Current Central Bank Rates:
BOE (Bank Of England): 0.50%
RBA (Reserve Bank of Australia): 4.50%
GBP/AUD Highs & Lows of June:
A movement of: 6.84%
Difference this would make on £200k
High: AUD 357,880
Low: AUD 334,960
A difference of AUD 22,920
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